Up To 75% Of Modified Mortgages To Re-Default -FitchLast update: 5/26/2009 1:40:49
Up To 75% Of Modified Mortgages To Re-Default -FitchLast update: 5/26/2009 1:40:49 PM
DOW JONES NEWSWIRES Mortgages that are modified only delay the inevitable, said Fitch Ratings, which predicts up to 75% of such loans will re-default after 12 months. "Loan modifications hold clear value for many homeowners provided the modified payments are sustainable, but more often than not reducing the home payments to an affordable level may not be enough to rescue borrowers who are overextended on other credit and expenses," said Fitch Managing Director Diane Pendley. She added that as home prices continue to fall, "there is growing evidence that some homeowners are voluntarily walking away from their homes even if they can financially afford to stay." Falling home prices have been a key reason for surging delinquencies, as borrowers are unable to refinance their mortgage as the loan amount is higher than the value of the home. As such, people are opting to stop paying the loan and instead deal with the consequences on their credit record. Critics of loan-modification efforts have said without notable reduction to principal amounts, delinquencies and foreclosures aren't expected to be significantly reduced. Fitch said through April, 7% of loans in residential mortgage-backed securities, including 18% of subprime loans, were modified. The ratings agency's prediction comes as Standard & Poor's Ratings Services said home-loan delinquencies eased among some categories in April. -By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136; firstname.lastname@example.org
home prices are far away from rising again. Unemployment will continue to rise, foreclosure activity up, upper income RE is starting to significantly cave in, and banks are undercapitalized to give good money to bad borrowers. There is a massive inequilibrium on on the demand-supply equation. Prices will continue to go down, although we'll see median home price numbers go up as the high end starts selling at reduced prices but RE is still 3-7 years away from hitting bottom.